What Are Ericsson's Key Expansion Areas?

(Continued from Prior Part)

Challenges from slowdown in smartphone market

Last year, Cisco Systems (CSCO) and Ericsson (ERIC) announced a strategic partnership that could help both companies realize synergies of $1 billion by 2018. Both companies have faced challenges in the smartphone market, driven by lower demand. Both Cisco and Ericsson are eager to provide better networking solutions by leveraging capability in their respective fields. It could lessen rising competition from Nokia (NOK) and China’s (FXI) Huawei.

Ericsson believes Cisco’s expertise in IP (intellectual property) and the enterprise space will complement Ericsson’s expertise in mobile networks. This collaboration will focus on service providers and then move to the enterprise space where it will accelerate the adoption of IoT (Internet of Things) services across sectors.

Cisco will gain geographic advantage after collaboration

Cisco and Ericsson have been impacted due to sluggish spending by telecom operators on network upgrades and expansions. Driven by growing competition from white label hardware and SDN (software-defined networking) companies, Cisco’s market share in the routing and switching segment has been falling in recent years.

The deal will enable Ericsson to sell Cisco’s products around the world. Ericsson does business in more than 180 countries. Ericsson will also sell Cisco’s gear to telecom leaders such as AT&T (T), Verizon, and Vodafone.

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Browse this series on Market Realist:

• Part 1 - Why the 4G Transition in India Is a Key Driver for Ericsson

• Part 3 - Why Cisco, Intel, and Ericsson Are Collaborating

• Part 4 - Ericsson and Ozone to Provide Small Cell as a Service to Reliance